The US dollar fell sharply on Monday as risk-on trade and falling US Treasury yields weighed heavily on the safe-haven currency.
Sterling remains subdued so far this morning, with GBP/EUR flat at €1.1040 and GBP/USD slipping to $1.3605. GBP/CAD is rangebound at C$1.7230, while GBP/AUD and GBP/NZD hold steady at AU$1.7464 and NZ$1.8671, respectively.
Coming up, will we see a disappointing Eurozone consumer price index weigh on the euro this morning?
What’s been happening?The pound retreated on Wednesday as GBP investors were rattled by Boris Johnson’s warning that England’s new lockdown measures could be in place for some time.
With the legislation put into law yesterday, the UK government will be able to maintain the lockdown until 31 March, allowing for a ‘controlled’ easing of measures rather than the end being a ‘big bang’.
However, helping to reverse some of these losses later in the session were comments from Bank of England (BoE) Governor Andrew Bailey, who told the Treasury Select Committee that the economic slowdown in Q4 wasn’t as bad as initially feared.
The US dollar, meanwhile, got off to a poor start during Wednesday’s European session as market sentiment was buoyed by hopes for more US stimulus as it grew clear that Democrats would gain control of the Senate following the Georgia runoff.
But the ‘Greenback’ was able to mount a comeback later in the session as a shock contraction in the latest ADP payroll report darkened the upbeat mood.
This rebound in the US dollar cut short the euro’s attempts to advance yesterday, with the single currency’s recent bullish run coming to an end.
What’s coming up?Looking ahead, the focus this morning will likely be on the Eurozone’s consumer price index, where another month of deflation could put some pressure on the euro.
Also pressuring EUR exchange rates will be the publication of the Eurozone’s retail sales as economists forecast sales growth will have contracted sharply in November.
In the UK, we are likely to see ongoing concerns that England and Scotland’s new lockdown measures will lead to another sizable slump in the UK economy continue to limit the upside in the pound today.
Closing out today’s session will be the publication of the ISM non-manufacturing PMI. Will a robust expansion in the US service sector help to revive the positive market mood and weaken the US dollar?
Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure
Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)